Duties to Employers - IV(C) Responsibilities of Supervisors

LOS

a. demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations of issues involving issues of personal integrity

b. distinguish between conduct that conforms to the Code and Standards and conduct that violates the Code and Standards

c. recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct

What is the primary directive of Standard IV(C) Responsibilities of Supervisors? Members and Candidates must make reasonable efforts to detect and prevent violations of applicable laws, rules, regulations, and the Code and Standards by anyone subject to their supervision or authority.

If you supervise a large number of employees, are you still responsible for the application of Standard IV(C) Responsibilities of Supervisors? You can delegate the supervisory duties, but you’re still responsible for supervisory responsibilities. In other words, even if you delegate supervisory duties to somebody else, if somebody under them violates the Standards, you are still responsible (as is the person you delegated to).

If your firm has a well established compliance policy manual and a compliance department, is the supervisor still responsible for Standard IV(C)? Yes

What are the two primary ways that a supervisor complies with Standard IV(C) Responsibilities of Supervisors? 1. Identifying situations in which violations are likely to occur 2. Establishing and enforcing compliance procedures to prevent and catch violations

If you work at a firm that does not have a compliance system, or the system is not adequate, and they offer you a supervisory position, what should you do? You should decline the supervisory responsibility, in writing, until the firm adopts procedures which will allow you to adequately accept such responsibility.

What are the five requirements for adequate compliance procedures? 1. Procedures should be drafted so that they are easy to understand. 2. Designate a compliance officer and clearly define the officer’s authority and responsibility. 3. Outline the scope of the procedures. 4. Outline permissible conduct. 5. Delineate procedures for reporting violations and sanctions.

What seven things should a supervisor do to enforce and follow the compliance program? 1. Disseminate the contents of the program to appropriate personnel. 2. Periodically update procedures to ensure that the measures are adequate under the law. 3. Continually educate personnel regarding the compliance procedures. 4. Issue periodic reminders of the procedures to appropriate personnel. 5. Incorporate a professional conduct evaluation as part of the employee’s performance reviews. 6. Review the actions of employees to ensure compliance and identify violators. 7. Take the necessary steps to enforce procedures once a violation has occurred.

What three actions should a supervisor take once a violation of Standard IV(C) has been discovered? 1. Respond promptly. 2. Conduct a thorough investigation of the activities to determine the scope of the wrong-doing. 3. Increase supervision or place appropriate limitations on the wrongdoer pending the outcome of the investigation.

If a supervisor fails to detect a Standard IV(C) violation when it happened, under what circumstances might they not be considered to have violated the Standard? If a supervisor was unable to detect violations, she may not violate the standard if 1. she takes steps to institute an effective compliance program 2. adopts reasonable procedures to prevent and identify violations.

If you update your firm’s compliance manual to meet the Standards, but alter some for “circumstances of the firm”, have you violated Standard IV(C)? No, according to Standard IV(C), “adequate” procedures are those designed to meet industry standards, regulatory requirements, requirements of the Code and Standards, and “the circumstances of the firm”.